Call for radical pensions reform partly answered
In July I posted a blog asking the question “Is it time for radical pensions change?”
Amongst my suggestions was that government should introduce a Basic State pension of £10,000 per year for those with a National Insurance contribution record of 30 years payable from age 66 and indexed in line with CPI.
I also suggested the abolition of the State Second Pension (S2P) scheme and the ability to contract-out of this S2P.
As Martin’s blog earlier today describes the government is considering the introduction of a universal pension of £140 per week (£7,280 per year for a single person and £14,560 for a married couple with the requisite national insurance contribution record).
Not quite as radical as my suggestion in July but pretty close.
I remain convinced that if people know with certainty what they are going to receive from the State it will enable them to decide how much more they need to save to get the kind of retirement lifestyle they require and also to provide for themselves personally if they wish to retire before State pension age.
In my July piece I had suggested an even more radical approach with the abolition of tax relief on future contributions to pension plans and the ability to take all accumulated pension funds as a lump sum subject to a tax charge. In return for this the basic state pension might rise to £10,000 per year.
This attracted some criticism the chief complaint being that no one would save in a pension plan unless there was tax relief granted against contributions.
As I pointed out though change needs to be considered in the round and not in individual parts of the package.
I still believe that there is more radical change to come from government but this at least is a step in the right direction.